AstraZeneca (AZN) and Bristol-Myers Squibb Company (BMY) announced that their type II diabetes drug, Farxiga, has been approved by the U.S. Food and Drug Administration (FDA).
The approval was in line with expectations as the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee (EMDAC) had rendered a positive recommendation on Farxiga.
Background
We however note that Farxiga’s path to approval has been far from smooth. In Jul 2011, the EMDAC had recommended against approving mainly due to safety concerns. Not surprisingly, the FDA issued a complete response letter (CRL) to AstraZeneca/Bristol-Myers in Jan 2012. While issuing the CRL, the U.S. regulatory body had asked for additional data to better assess Farxiga‘s risk-benefit profile. The agency said that the additional data may come from ongoing or new studies.
Following the receipt of the CRL, AstraZeneca/Bristol-Myers conducted several new studies on Farxiga. The companies not only included data from these studies in the resubmitted NDA but also provided additional long-term data (up to four years of duration) from earlier studies.
We note that the drug was approved in the EU in Nov 2012 and is marketed under the trade name Forxiga for treating type II diabetes.
AstraZeneca to Have Full Global Rights to Farxiga
AstraZeneca and Bristol-Myers recently signed an agreement under which the former will acquire the latter’s global diabetes business. The deal is expected to close this quarter. The pre-existing collaboration between the companies will be terminated and AstraZeneca will gain global rights to major diabetes products including Farxiga.
As per the latest deal, the approval of Farxiga triggers a $700 million payment from AstraZeneca to Bristol-Myers.
Our Take
We are pleased with the approval of Farxiga in the U.S. Now that AstraZeneca will acquire full rights to the drug, it stands to gain more. Generic competition has adversely impacted AstraZeneca's revenues over the past few quarters – this has put significant pressure on the company. In this context, the approval of Farxiga and the subsequent up-take of the drug will give a much needed boost to the company’s top line.
AstraZeneca carries a Zacks Rank #3 (Hold). Some better-ranked stocks include GlaxoSmithKline (GSK) and Bayer (BAYRY). Both carry a Zacks Rank #2 (Buy).
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